The best time to buy a house and more home buying tips

This is Part 3 of a 5-part series for first-time home buyers. Missed the first two articles? Catch up on Part 1 and Part 2.

When it comes to buying a home, is there ever a “perfect” time? Determining when to buy a house depends on your unique situation. However, if you’re looking to get the best possible price and save money (perhaps to put towards more stylish finishings or a custom closet organizing system), consider waiting for the best time of year to buy a house: fall or winter.

Is there a chill in the air? Start house hunting!

The real estate market tends to cool down in the winter. People are less active so there’s a good chance at avoiding a bidding war, but inventory may be low, so you may have to wait a few months to see a home you want.¹ In addition, research suggests that buying a home in January (if it’s still on the market) will cost a buyer on average 9% less than buying the same home in June.² For a $200,000 home, that can mean a whopping $18,000 in savings. That may equal extra cash to put toward one of the items on your wish list.

One reason? The housing market and the school system go hand in hand. Since families tend to avoid moving when class is in session, the busiest real estate seasons are during the spring and summer, when children are on break so they can adjust to a new area before school starts.³

Meanwhile, during fall and winter, the market slows down. As a potential home buyer, you can use this knowledge to your advantage. In general, if a house didn’t sell during the “hot” seasons (temperature and real estate-wise), sellers often remove their listing and put it back on the market in the spring.

Sellers who leave their homes on the market during fall and winter are most likely “really motivated.” If you’ve been binge-watching house hunting shows, you know that means that buyers may be willing to accept a lower offer and you could save more.

Even though fewer homes on the market might make you think the sellers have an advantage, the truth is that with so few buyers in the winter, it actually means that it’s easier for the buyers in terms of competition and seller motivation.

Questions to ask when buying a home

“When is a good time to buy a house?” Although fall and winter are the best time to house hunt, there are factors to consider no matter which time of year you buy. Here’s what to look for when buying a house:

• Are mortgage rates low? Consider buying when mortgage interest rates (the percentage of interest you’ll have to pay for the life of your home loan) are as low as possible.⁴ Mortgage rates are constantly going up and down. If rates are falling, it may make sense to wait and get the mortgage at the lowest rate possible. If you find a house you love in a rising rate market, you may want to lock in a rate ASAP. Getting a low rate may help you put away more in savings or even apply extra money to your principal payment each month, which will increase your equity and help you pay off your mortgage faster. Talk to your mortgage lender about the best time to secure the prime rate for your particular case.
• Is it a seller’s or buyer’s market? Ideally, you want to look for a home in a buyer’s market. That’s when there are more houses for sale than potential buyers⁵, so sellers may be more willing to negotiate. You might be able to buy an upscale home for a lower cost and be able to save more than you would in a seller’s market (when properties are scarce and bidding wars ensue).
• Is it better for me to rent or buy? Most people believe that buying a home is a better option than renting because you’re building equity as a homeowner. This is true—as long as you plan to stay in the home for at least 5 years.⁶ If you move before that time, renting may be the better option, because of the costs associated with buying (like lawyer’s fees, closing costs and interest on your mortgage). And, there’s the down payment to consider. A simple math equation can help you figure out how much you need to save. The longer you rent, the more time you’ll have to save up for that down payment. Plus, there are other long-term costs associated with owning a home, such as property taxes and home repairs, that you don’t have to worry about as a renter.

Whether or not you’re able to focus your home search during a particular time of year may be out of your control. But knowing these home buying tips—and using them if you’re able to—could help you save big. If you buy in fall or winter, you could pay significantly less. Even better, by the time summer rolls around you could be settled into your new home and soaking in the hot tub you added to your back patio with the cash you saved.

In Part 4 of the series, learn the true costs of owning a home and how they’ll impact your finances.